Joe’s Jeans Inc. unexpectedly moved into the black in the third quarter as both the wholesale and retail operations generated sales increases of more than 24 percent.
This story first appeared in the October 16, 2012 issue of WWD. Subscribe Today.
In the three months ended Aug. 31, net income hit $1.4 million, or 2 cents a diluted share, versus a loss of $2 million, or 3 cents, in the year-ago period. Analysts expected the company to report a 1 cent a share loss.
Sales grew 25.5 percent to $30.3 million from $24.2 million in the 2011 quarter as wholesale volume, led by a strong trend in men’s, grew 25.7 percent to $24.8 million, and retail volume picked up 24.3 percent to $5.5 million. Retail was aided by the addition of four stores, raising the count to 25 units, and a 7 percent increase in same-store sales.
Gross margin rose to 45.6 percent of sales from 40.3 percent in last year’s period. The 2011 period was dragged down by a $1.6 million inventory writedown.
Marc Crossman, president and chief executive officer, told WWD that its more moderately priced Else brand, which began rolling out to Macy’s doors in the spring, had grown from is initial 149 doors to a total of 314 stores now, with an additional 300 units expected to stock the product in the next year to 18 months. Else accounted for about $3 million in third-quarter sales.
“It’s not something that’s going to be limited to just denim,” he said of the new assortment. “Already we’re working on a line of woven shirts that pair well with the denim and, as we create compelling product for Macy’s, we expect that they’ll be receptive to it.”
Having opened its 26th store since the end of the quarter, and having seen its retail operating income flip to a $140,000 profit in the third quarter from a $1.3 million loss a year ago, Joe’s is continuing to expand its retail footprint with emphasis on full-price stores, which will account for 19 of its year-end total of 30. “Right now, our focus is really to build up the full-price business and flip the ratios and have even a three-to-one ratio of full-price stores to outlets,” the ceo said. Of the four stores planned for the fourth quarter, just one is an outlet.
While wholesale expansion came almost entirely from growth in men’s, Crossman said he was upbeat about the potential of the company’s new Vintage Reserve program, which is more focused on various interpretations of indigo denim, to elevate women’s results at wholesale. “We’ve been in a period where prints and colored denim have really sold well,” he said. “I don’t think color and prints are done, but they’re just not as explosive as they had been.”
For the nine months, Joe’s posted net income of $3.6 million, or 5 cents a share, versus a loss of $1.1 million, or 2 cents. Revenues were up 21.2 percent to $84.9 million.
Joe’s shares closed down 1 cent, or 0.9 percent, to $1.16 during regular trading on Monday but rose 5 cents, or 4.3 percent, to $1.21 in after-hours trading following the disclosure of results as the equity markets closed.